BiggerPockets Real Estate Podcast

Should I Sell My 4% Interest Rate Rental Property? ($300K in Equity!)

Dec 11, 2024

In this engaging discussion, Henry Washington, a savvy real estate investor, dives into the dilemmas of rental property management. He explores whether to sell or refinance a low-performing rental while sitting on substantial home equity. With insights on avoiding the pitfalls of 1031 exchanges and enhancing cash flow through rental strategy adjustments, like converting properties to mid-term rentals, Henry delivers valuable wisdom. Listeners will also uncover innovative ways to use home equity without refinancing, making this a must-listen for investors!

37:10

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Episode guests

Henry Washington

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Quick takeaways

Assessing real estate goals over the short-term is crucial for effective management of your rental property portfolio.

Evaluating property performance against market conditions highlights the potential benefits of selling versus refinancing to maximize capital.

Deep dives

Real Estate Goals Drive Decisions

Real estate goals should dictate how one manages their property portfolio. It's crucial to assess objectives over the next one to three years to determine the best course of action for any given property. The speaker divides investments into three categories: long-term rentals, passive investments in larger projects, and private lending, emphasizing that aligning actions with these goals leads to more effective portfolio management. This focus on strategic clarity helps to decide whether to sell, hold, or refinance properties.

Intro

2min

Maximizing Real Estate Investments

6min

Navigating Property Financial Decisions

6min

Navigating Capital Gains and 1031 Exchanges

9min

Navigating Rental Strategies and Equity Leverage

7min

Navigating the Rental Market and Equity Strategies

4min

Understanding Real Estate Investment Goals and Strategies

3min

Should you keep, refinance, or sell your rental property? If you’re sitting on a low mortgage rate and plenty of equity, you’ve probably asked yourself this once or twice within the past year. Most people who bought a rental property before 2020 have seen unprecedented appreciation and rock-bottom interest rates and are likely sitting on a war chest-sized home equity position. But that equity could be better spent investing in new properties than keeping your old ones.

This is Dave’s exact predicament. He’s got a property he bought back in 2016 that has over $300,000 in home equity. It’s cash flowing a solid $500 per month with a mortgage rate of just under four percent, but only producing a measly two percent cash-on-cash return. He’s getting four times the return on his recent investment property purchases, so should he sell? Not so fast; we’re doing the math to figure out whether he should keep, refinance, sell, or change strategies on this property.

Got the same good problem? Stick around as we even drop a fifth option most investors overlook entirely, which gives you the best of both worlds.

In This Episode We Cover:

Whether to keep, refinance, or sell a low-performing rental property

The obvious problem with cash-out refinancing in 2024/2025

Why we DON’T love doing 1031 exchanges (and a tax-advantaged way around them)

Converting your long-term rental into a medium or short-term rental (MORE cash flow!)

How to access home equity WITHOUT refinancing your property or getting a new loan

And So Much More!

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